Asset Allocation - 2022

fizio

I retired last year so have been trying to get my investments in some kind of order as they were spread all over the place. I have. DB income so happy to be 100% invested in funds and prefer the low cost tracker approach via Vanguard etc
Here is where I am heading and its pretty much various global trackers - I decided to keep a max of 10 investments, although I did also consider putting everything into a global tracker. I have plenty of years ahead (hopefully) so will see how things go and review every 6 months.

Comments/criticisms welcome...

Target	Sector
15%	UK  Tracker
7%	US S&P 500 Tracker
30%	Global Tracker
6%	Emerging Markets Tracker
6%	Global Property Tracker
6%	Global Infrastructure Tracker
5%	Global Smaller Companies Tracker
5%	Global Tech Tracker
10%	Global Corporate Bonds
5%	UK Gilts

Notepad_Phil

No replies yet, so here's my thoughts on the funds you've chosen to go with.

Personally, if I had a DB pension that would provide enough income then I'd probably go for 100% equities and drop the property, bonds and gilt funds (and probably infrastructure too).

Much of the other funds will also already be in tech companies so I'd probably get rid of that too.

You're then left with UK, US, Global, Emerging and Small Cos, where personally I'd either drop the US or replace it with a Pacific regional fund (given that the US is already the majority of a global tracker and I have my doubts that the US can continue their outperformance).

I'd then use something like 50% global with 10 to 20% in each of the other funds.

But the changes above are just my opinion, and it's your opinion that matters and if you have well thought out reasons for having my dropped funds then keep them.

Thrugelmir

Why not simply find a multi asset fund that provides broad diversified exposure? A random % allocation across a selection of areas is just that, random. Setting out your rationale would provide context to the choices made.  

What's immediately obvious is the replication of holdings.SP500, Global Tracker and Global Tech will all be weighted to a relatively few number of stocks. 

Minimal exposure to Europe and Japan. 

Audaxer

Thrugelmir said:

Why not simply find a multi asset fund that provides broad diversified exposure? A random % allocation across a selection of areas is just that, random. Setting out your rationale would provide context to the choices made.  

What's immediately obvious is the replication of holdings.SP500, Global Tracker and Global Tech will all be weighted to a relatively few number of stocks. 

Minimal exposure to Europe and Japan. 

I also agree a multi asset fund would seem to be a better solution. 

It would be interesting to see how the returns of your proposed portfolio compared to a multi asset fund with a similar equity percentage - like for example VLS60 or HSBC Global Strategy Balanced.

You say you are going to review every 6 months. If you are confident of your weightings are you going to rebalance back to these weightings every 6 months?

dunstonh

No replies yet

I was going to reply but the other thread on sector allocation, multi-asset etc sort of put me off replying on this one.

10%	Global Corporate Bonds
5%	UK Gilts

With such a high weighting to technology and the volatility that it can bring, does 15% to fixed interest securities really make sense?     

The model you are using is a little unusual as it is normal to see it broken down by region/country and then fixed interest/property.   You are have included focused industry bias as well.    Is this  particular model you have researched or are you picking percentages pretty much at random?
You are using index tracking funds but you are giving it a heavy dose of investment management decisions.

You have 15% in a UK tracker (and probably more allocated to UK when you look at the other funds held).    The UK is typically stronger in the small and medium cap companies.  Is your tracker all share, large, small or medium cap?

There is no perfect model.  No option that is best.   Just a variety of opinions.   However, all models should have reasoning, structure and process behind them.   There are plenty of viable methods you can use.  However, there are more bad ways of doing it.    Not saying yours is one or the other but without knowing the structure nad process you have in place, it is difficult to tell.

so will see how things go and review every 6 months.

You can rebalance too frequently as well as not frequently enough.  Annually is probably sufficient.  

Finally, I assume you are talking a portfolio size over £100k?   If not, then you should stick to multi-asset or a global equity fund (risk allowing).     

bostonerimus

I'm in basic agreement with the other posters, look at a multi-asset fund or simplify your portfolio of trackers. FYI I have a DB pension and keep a couple of years spending in the bank and my invested money is basically in a domestic equity index fund, and international equity index fund and a multi-asset fund for my bond allocation which is quite small.

fizio

Thanks to all for the constructive feedback and I will take it on board. The main reason I am not going for a multi-asset fund is that the DB pension and BTL portfolio I have means I can handle the risks of an all-equity portfolio - the corp bonds are historic and i decided to just keep. The idea behind some us gilts was to possibly look at getting some as/when bonds become a bit more attractive. 
I do agree that there is overlap between and US is a big chunk of the portfolio. I did consider simply going for a ww tracker but felt i needed a bit more diversity - especially as the total value (600k+) is split across ISA/SIPP/GIA and across me and my OH as well as between Vanguard and Interactive Investor platforms (some historic reasons and some tax and some to not rely on a single platform). The basic strategy was to keep my OH in a ww tracker/uk/bonds and I have mine in the rest
The percentages are not totally random but also do not have concrete logic behind them either - some of the numbers are simply to do with how much i have in that particular account given the 6 accounts involved
The reason for the 6 month review is to just keep any eye on things rather than any rebalancing - I may well come to the conclusion of reducing the number of funds.

Thrugelmir

Using a mix of global funds you've simply ended up with a form of hybrid global tracker. Global benchmark indexes come in different forms. They aren't simply market capitilisation weighted. Far more complex than that.

There's many segments of the global markets where you've no exposure at all. To be well diversified, individual investments need to be non correlated.